The Antidote To China's Debt Addiction Could Make Things Worse

China is hooked on debt, and the policymakers' idea of treating the addiction could make things worse. Chinese officials said two months ago they will make it easier for commercial banks to swap problem loans in overindebted companies for stock, in a maneuver known as a debt-for-equity swap. The plan may allow conversions of up to $155 billion of bad loans, Bloomberg reported, which could help prevent struggling firms from default. This plan could, depending on who you talk to, simply move debt from one party to another, or alternatively incentivize the wrong kind of behavior.

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